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Quick Tips: Life Time ISA vs Help to Buy ISA

Quick Tips: Life Time ISA vs Help to Buy ISA

Help to Buy ISA: While Stocks Last

For the last few years, the Help to Buy ISA has been a savings god-send for a generation of people desperate to own their first home. The government incentive encouraged thousands of people across the UK to start putting money away every month, with the promise of a bonus payout of up to £3,000 – what’s not to love?

Sure, the incentive carries a few restrictions. For instance – you can’t use the bonus for the initial deposit on a house or the required fees. Also, you can only buy a new-build house up to a certain value. But the pros really do outweigh the cons. Who doesn’t like free money?

Savers could claim their 25% bonus on a minimum saved amount of £1,600 (receiving £400 back) up to a total of £12,000 (which would return £3,000). Any additional savings can be kept in the tax-free account. However, the bonus will only be applied to the first £12,000.

There’s just one problem: the Help to Buy scheme is coming to an end. As of the 30th of November, just over a week away, interested customers will NOT be able to open a new account.

Will Existing Accounts be Affected?

Don’t worry – if you’ve only recently opened the account, or if you’re hoping to put a bit more away before you do eventually buy a house. Existing accounts will be kept open for an additional 10 years. Up until 2029, you WILL still be able to regularly save in your ISA. This is with the condition that the bonus is claimed before November 30th 2029.

Buying a house is the dream for many people, and the ISA introduced a new incentive that enabled thousands of people to take out a mortgage. This is an increasingly admirable feat, especially in the age of payday loans and bad credit.

It’s not too late to open up your own account! If you’re interested in applying for a Help to Buy ISA, here’s what you need to know:

What is an ISA?

There are many different ways to save: bonds, limited access accounts, general savings accounts and ISAs.

‘ISA’ is a term that’s thrown around a lot in the finance and banking worlds, as it’s a tax-free way to save a bit of cash each.

When you save money, most of the time, you’re rewarded with monthly or annual interest payments. They’re generally very low percentages of the total balance in the account, but they can still help to pad out your savings. After all – the more you save, the more you’ll get back in interest!

What many people don’t know is that you actually get taxed on the interest you earn; it might not be a huge amount, but it certainly starts to add up over time.

If you save in an ISA, or an Individual Savings Account, you will benefit from TAX-FREE interest payments. As they say – every little helps!

Savings limits

We all know that the government loves their tax, which is why there is a yearly savings limit applied to ISAs.

The limit varies each year and is outlined in the annual budget. It applies to the tax year, not the calendar year; from April 2019 to April 2020. For example, the ISA allowance is £20,000.

This limit is not an individual ISA savings allowance; rather, it applies to every ISA you have. You can only add a total of £20,000 in new money to your ISAs throughout this tax year – this is still more than enough for most people, however.

Why is the Help to Buy ISA ending?

The Help to Buy ISA is coming to an end to make room for a new product: the Lifetime ISA. This is a very similar savings scheme, designed to either help people get the money together for a deposit on their first house or to squirrel away funds for later in their life.

The Lifetime ISA, affectionately referred to as LISA, also offers a 25% bonus. The catch is that you can only pay into it until you turn 50. You won’t be able to make any withdrawals UNLESS you buy your first house or cross the age threshold. It can be a great way to put money away to secure your future.

If you want to learn more about how the LISA works, you can do so below.


Getting a mortgage

If you’re interested in taking out a mortgage, but you’re worried about your credit score, we’ve got some good news. At LoanBird, we offer a range of great bad credit loans to help you start building up your score.

Feel free to make an application – our service is completely free to use, with absolutely no obligation.